The cryptocurrency market has been facing stagnating prices for over a year. Since the bitcoin bubble burst early in 2018, most cryptocurrencies have had a hard time gaining value. Almost none have returned yet to their Pre- December 2018 prices.
Bitcoin and Ethereum have been among the main ailing cryptocurrencies. This is expected since both of these led the market back then. However, a recent price surge for Ethereum has sectors of the industry wondering: What’s up with that?
Ethereum, while still one of the main cryptocurrencies, hasn’t had any groundbreaking announcements recently. In fact, if anything, Binance’s abandonment of the Ethereum protocol for their own coin should have made prices tank.
Yet, here we are, with Ethereum surging. Perhaps it’s a good time to see just how healthy the environment around the cryptocurrency is.
Bitcoin is also on a price surge
This is important. Bitcoin, which has led the market in price since its inception, is also experiencing a value surge. It hasn’t reached the heights of December 2017, nor is it expected to. However, Bitcoin’s lead in the market means its price is often used to gauge the whole market’s health.
When Bitcoin price rises, Ethereum value likely follows suit (check CoinReview for Ethereum prices ). It is common for other cryptos to also make gains as they did back in 2017, only to lose them quickly later. While most cryptocurrencies are stagnating now, a small surge in Bitcoin prices might be enough for Ethereum, who is among the market leaders.
In other words, this price surge on ETH could be investors hedging their bets in the less volatile currency in case we get another crypto bubble. It’s unlikely to happen, but it could.
Alternately, BTC’s value surge could be seen as an indicator of the crypto market recovering. Said recovery would likely push other currencies up, starting with the ones seen as more secure. ETH is one of those.
It could be a small bubble
Let’s assume that, for whatever reason, somebody decided to invest a lot of money in ETH. This amount of money and tokens moved was large enough to be noticed by exchange sites and several other investors.
Noticing this surge in ETH trading and a small price surge, other people jumped in. ETH is generally regarded as relatively safe, so the risk was deemed low. Prices keep going up, although with small periods of decrease, but everything seems good.
Now, what happens when the first actor in this situation sees the price rise above their selling point and sells it all?
If a transaction or transactions led a price spike, a sale could incite a downturn. It might sound a bit crazy, but let’s remember the stock market and the crypto market are quite similar. And in the stock market, sometimes a movement as small as a CEO mentioning another company can incite a price surge.
It is actually believed that the Bitcoin bubble was caused by this. A handful of people held most of the BTC available, hoarding them. This hoarding made Bitcoin look like a rare commodity, and prices went up. The bubble then burst when some of those hoarders sold their crypto.
Yes, it’s market manipulation. It’s also legal.
An off-handed comment might have been misconstrued as an instruction
As stated before, in stock markets small comments can lead to rushes. Somebody who’s seen as influential might say or do something leading others to believe they have insider info.
These other people then follow suit, because “if X is doing it, there must be a good reason.” Another variant of this is “If X supports Y it’s because he knows Y will be successful.” This train of thinking ignores actual facts, instead of relying on the actions of somebody perceived as successful.
It is known as the bandwagon effect. It happens not only in the stock market but in most markets. However, stocks, being largely speculative, are particularly vulnerable to these occurrences. And for Ethereum, there have been a couple of them recently.
First, on April 29, 2019, millionaire Elon Musk tweeted… well, he tweeted the word “Ethereum” and nothing else. This might sound like a stretch to some, but it wouldn’t be the first time mention or reference by somebody makes prices go up.
There’s real expectative that ETH might break big
There’s another thing, one that might explain why the upwards trend has lasted. Recently, rumors have been going around about the CTFC approving an Ethereum futures product. While this isn’t yet official, it seems to be a matter of when to announce rather than what to announce.
These rumors are important because a price spike is likely expected when this news goes out. As such, plenty of crypto investors might be buying ETH now in preparation so they can sell when prices go up. If the surge of investors buying ahead is big enough, that alone would drive prices up.
The risk here is that lots of crypto investors might decide to sell at the same time after the announcement. However, if an announcement is positive, people will decide to keep their investments instead. Crypto, like blockchain technology fortunes, is largely affected by current news headlines.
Ethereum is overall having a great moment
Even if the Bitcoin surge has helped, the truth is that Ethereum is doing fine. They aren’t first in the market (that’s still Bitcoin,) and they likely won’t ever be, but over the last two years, ETH has only grown stronger.
Recent deals are great, but they’re built on a solid background. Ethereum, although an older blockchain, is one of the trustable ones. It is established and considered a great asset to the community.
The price surge could be due to many things, but there is one we can infer: There’s still trust in the coin. The price is surging because demand is rising, and demand only rises in cases like this if the trust is still there.
That ETH is currently gaining momentum is great, but that momentum comes backed by a lot of community support. Price surges might last or not, but in the end, we now know for sure, there’s still strength in this old blockchain.